1986 (3) TMI 313 - HC - VAT and Sales Tax

Summary

Issues:
1. Validity of assessment for the period from 20th October, 1970, to 19th September, 1974.
2. Refund of tax paid by the petitioner for the aforementioned period.

Analysis:
The petitioner, engaged in manufacturing steel trunks, applied for registration under the Bengal Finance (Sales Tax) Act, 1941, in 1974 after its gross turnover exceeded the taxable limit in 1970. The Commercial Tax Officer initiated an assessment for the period from 20th October, 1970, to 19th September, 1974, despite the petitioner's objection that no composite assessment for multiple years was permissible. The Commercial Tax Officer proceeded with the assessment and imposed tax on the petitioner. The petitioner then appealed to the Assistant Commissioner, who declared the assessment as null and void, leading to no further proceedings by the tax authorities.

Regarding the refund claim, the petitioner sought the return of the tax paid for the disputed period, contending that no valid assessment existed. Citing legal precedents, including G. Lakshminarayana v. Commercial Tax Officer and Deep Chand Jain v. Income-tax Officer, the Court emphasized that without a lawful assessment, no tax liability could be enforced. The Court highlighted that the State cannot retain unauthorized or illegal taxes and must refund any taxes collected erroneously. The judgment stressed that if taxes are collected but not due, they must be refunded, as upheld in R. Gopal Ramnaryan v. Third Income-tax Officer.

The Court ruled in favor of the petitioner, stating that no consolidated assessment was permissible, and since the assessment was annulled by the Assistant Commissioner, the petitioner had no tax liability for the disputed period. The judgment emphasized that the State cannot retain taxes not lawfully collected, and the petitioner was entitled to a refund. Consequently, the Court ordered the respondents to refund the tax collected, along with applicable interest, within 8 weeks from the date of the order.

In conclusion, the Court found in favor of the petitioner, emphasizing the illegality of the assessment for the disputed period and ordering the refund of the tax paid during that time frame. The judgment underscored the principle that taxes collected unlawfully must be returned to the taxpayer and directed the respondents to comply with the refund order within a specified timeline.